What is at-will employment?

At-will employment means employers can dismiss employees without having to establish "just cause" for termination, and without warning, as long as the reason is not illegal.

What are the main characteristics of at-will employment?

The main characteristics of at-will employment include:

• No requirement for the employer to provide a reason to terminate employees
• The ability for the at-will employee to leave the job at any time without reason or penalty
• The absence of specified employment duration
• Flexibility for employers to change terms of employment, such as wages, benefits, or job responsibilities, without notice

What are the exceptions to at-will employment?

All US states have some degree of at-will employment, aside from Montana. There are several key exceptions to at-will employment:

Public policy exception: Employees cannot be fired for reasons that violate public policy, such as refusing to commit an illegal act. Implied contract exception: If an implied contract is formed through company policies or assurances of continued employment, the at-will status may be overridden. Covenant of good faith and fair dealing exception: In some states, there's an expectation that employment decisions will be made fairly and in good faith. Statutory rights exceptions: Federal and state laws protect employees from being terminated for retaliation or whistleblowing. Under civil rights legislation, employees are protected against discrimination based on race, color, religion, sex, national origin, age, disability, or veteran status. In some states, this includes sexual orientation.

How to ensure compliance with legal requirements

Employers should be aware of and adhere to local, state, and federal laws around at-will employment so they can develop clear, written policies that outline the at-will employment relationship within their organization.

They should also train management, leadership, and HR teams on the appropriate reasons for firing employees, and require them to document performance issues and the reasons for termination to protect against wrongful termination claims.

The impact on team dynamics, performance, and job security

At-will employment can affect team dynamics by creating an environment of uncertainty, potentially leading to a lack of trust and lower job commitment. It can aslo lead to reduced job security for employees, as they can be terminated at any time without cause. This lack of security can impact employee morale and loyalty.

However, some argue that it also provides flexibility for employees to leave positions that are not a good fit without repercussions. It can also lead to higher performance if employees feel motivated to maintain their employment status by consistently demonstrating their value to the team.

Organizations can balance at-will employment by:

• Offering competitive compensation and benefits packages
• Providing opportunities for professional development and career growth
• Fostering a positive company culture that values employee contributions
• Implementing fair performance evaluation systems

Can at-will employment be modified by employment contracts?

Yes, at-will employment can be modified by employment agreements that set forth terms of the employment relationship, employment duration, specific reasons for terminable offenses, or notice requirements. Such contracts must be carefully drafted to ensure they are legally binding and clear to both parties.

How does at-will employment work when hiring internationally?

At-will employment is primarily a concept found in US labor law and does not apply in many other countries, where employment contracts and labor protections are more common. When dealing with a global workforce, it's important for multinational companies to understand and comply with the employment laws in each country where they operate and hire in.

What is the impact of at-will employment on remote work?

At-will employment provides flexibility for employers with remote workers to make quick staffing changes as business needs evolve. For remote employees, it emphasizes the importance of maintaining productivity and visibility despite their location. However, employers must be cautious of different state laws that may apply to remote employees.

5 ways employers can improve at-will employment practices

Employers can enhance their at-will employment practices in a few ways:

• When preparing job offers, employers should communicate clearly to new hires that they are being offered at-will employment.
• In your employee handbook, provide precise communication about job expectations and performance standards.
• Employers should offer regular feedback to employees to ensure they are aware of their performance and any areas of improvement.
• Create a transparent process for addressing grievances and conflicts to help employees feel heard and valued.
• Employers should make sure any decisions to terminate an employee are documented, based on legitimate business needs, and not done in bad faith.

How to measure the impact of at-will employment

While at-will employment provides flexibility for both parties, it can also have negative consequences. HR professionals should know how to assess how well at-will employment is serving both employees and the organization. Here are a few key metrics to track:

Employee turnover rates: If the turnover rate is high, it could indicate that employees may feel insecure in their jobs or that the organization may be experiencing difficulties with its management practices.

Number of wrongful discharge lawsuits filed against the company: If the number of lawsuits is high, it could indicate that the organization may not be following best practices when it comes to employee terminations.

Employee satisfaction and engagement levels: If employees are dissatisfied or disengaged, it could indicate that they do not feel secure in their jobs and may be more likely to leave the organization.

Business agility in responding to market changes and staffing needs: If the organization is unable to quickly adjust its workforce to meet changing business needs, it could indicate that at-will employment is not the best approach for the organization.

Use Deel to manage your HR, terminations, and more in the US

With Deel’s PEO services*, we take care of payroll, HR, and benefits administration across the US, while ensuring state tax compliance and handling sensitive issues like terminations and worker claims. You gain:

• Instant online payroll services
• Access to big-company benefits and benefits administration
• Deel HR to manage your entire workforce
• Trainings, HR policies, and on-demand HR support
• Advanced tax and benefits compliance

Learn more about Deel’s PEO services and payroll services.

*Provided by Deel PEO US, LLC, Deel Employment Services, LLC, or through Deel's partnership with licensed providers where required.

Disclaimer: This content is for informational purposes only and does not constitute legal advice. Please refer to a legal expert for guidance.